Pay debate turns to state, local employees

Karen Tumulty, national political correspondent, Washington Post

Your pay has been the subject of debate for the past couple of months, resulting in the President proposing and Congress passing a two year pay freeze.

But now the pay debate is turning to state and local government employees - some who receive outrageously generous retirement packages - in one case, to the tune of half a million dollars.

States are now turning to the federal government for a model of retirement benefits reform. A quarter century ago, the federal government adopted a hybrid pension system - a combination of a fixed pension, social security and a 401(k)-type plan.

The norm for state and local employees now is a defined benefit plan that guarantees a certain pension payment, immune from Wall Street's performance.

The budget troubles of states and municipalities have turned greater attention to this system - and the abuses happening within in.

In one case in California, the former city administrator of a small town is collecting $520,000 in pensions, Washington Post national political correspondent Karen Tumulty reported.

This former administrator had worked five positions at the same time and was receiving a pension for each job, Tumulty said.

"A few bad actors can create a very distorted picture for everyone," she said.

Tumulty reports that 19 states have reduced their pension liabilities and a dozen are considering a hybrid system that includes a 401(k)-type plan.

However, not all of these changes can happen immediately.

"There's a problem in that you cannot change anything that has been promised a current employee in most places - and that of course is where the money is," Tumulty said.

Some employee unions - such as the American Federation of State, County and Municipal Employees - are dedicated to the defined benefit pension.